Analyzing Financial Statement Effects of Bond Redemption

Holthausen Corporation issued $200,000 of 11%, 20-year bonds at 108 on January 1, 2010. Interest is payable semiannually on June 30 and December 31. Through January 1, 2016, Holthausen amortized $2,096 of the bond premium. On January 1, 2016, Holthausen retires the bonds at 103.

Required a. Prepare journal entries to record the issue and retirement of these bonds.

General Journal
Date	Description	Debit	Credit
01/01/10	CashBonds payableBond premiumGain on retirement of bondsLoss on retirement of bonds
	Bonds payable
	CashBonds payableBond premiumGain on retirement of bondsLoss on retirement of bonds
01/01/16	Bonds payable
	CashBonds payableBond premiumGain on retirement of bondsLoss on retirement of bonds
	Cash
	CashBonds payableBond premiumGain on retirement of bondsLoss on retirement of bonds

b. Post the journal entries from part a to their respective T-accounts.

Cash (A)
01/01/10	Answer	Answer
01/01/16	Answer	Answer

Bonds Payable (L)
01/01/10	Answer	Answer
01/01/16	Answer	Answer

Gain on Retirement of Bonds (R)
01/01/10	Answer	Answer
01/01/16	Answer	Answer

Bond Premium (L)
01/01/10	Answer	Answer
01/01/16	Answer	Answer

c. Record each of the transactions from part a in the financial statement effects template. Remember to use negative signs, when appropriate.

	Balance Sheet									Income Statement
Transaction	Cash Asset	+	Noncash Asset	=	Liabilities	+	Contrib. Capital	+	Earned Capital	Revenues	-	Expenses	=	Net Income
1/1/10 Issue bonds at a premium		+		=		+		+			-		=
1/1/16 Retire bonds issued on 1/1/10		+		=		+		+			-		=

Please answer all parts of the question.